[Posted 7:00 AM ET]
Wall Street…and China
Chinese Vice Premier Wu Yi came to Washington for trade talks
with U.S. Treasury Secretary Hank Paulson and Ms. Wu must
have been smiling on the flight home because China didn’t give
up anything.
Earlier, upon her arrival, Mr. Paulson explained that Americans
are an “impatient” people who are demanding a change in
China’s attitude toward free trade between the two countries, and
that “Even the notion of a dialogue may seem too passive for
America’s action-oriented ethic. It is up to us, over these two
days and in the work that follows, to show that words are
precursors to action,” adding that Americans are increasingly
skeptical about China’s intentions. “Unfortunately, in America
this is manifesting itself as anti-China sentiment.”
Ms. Wu countered, “Against the ever-deepening economic
globalization today, confrontation does no good at all for
problem-solving, and pressure and posturing can only make the
situation more complex. We should not easily blame the other
side for our own domestic problems.” [Wall Street Journal]
At the end of the discussions, all the U.S. gained was a few
air routes and the possibility China may employ our clean-coal
technology. Congress was unimpressed, thereby increasing the
possibility of a trade war through irresponsible legislation fueled
by election year politics.
There are a number of problems here, first of which is the fact
Hank Paulson is highly compromised after his work in China
with Goldman Sachs. I would compare it to all the comments I
made years ago concerning Taiwanese businessmen and their
relationship with the mainland as they sought closer ties. Many
of these figures didn’t care about the future of democratic
Taiwan; it was all about the money. And in a similar fashion,
despite what Paulson’s true intentions may be today, there is a
history there, and it wasn’t always about promoting America’s
best interests, of this you can be sure.
China is playing hardball because it can. It knows it has the
United States over a barrel, and because of this it attempts to play
the aggrieved victim even when the facts speak otherwise.
Beijing complains about being bullied; whether the topic is steel,
paper, intellectual property rights, piracy or access to its financial
services industry.
Then you have the issue of tainted food. The Food and Drug
Administration detained some 107 food imports from China at
U.S. ports just last month. Rick Weiss of the Washington Post
reports:
“Dried apples preserved with a cancer-causing chemical. Frozen
catfish laden with banned antibiotics. Scallops and sardines
coated with putrefying bacteria. Mushrooms laced with illegal
pesticides.”
I will never buy another fish product labeled “from China.”
Weiss adds:
“China’s less-than-stellar behavior as a food exporter is revealed
in stomach-turning detail in FDA ‘refusal reports’ filed by U.S.
inspectors: Juices and fruits rejected as ‘filthy.’ Prunes tinted
with chemical dyes not approved for human consumption.
Frozen breaded shrimp preserved with nitrofuran, an
antibacterial that can cause cancer. Swordfish rejected as
‘poisonous.’
“In the first four months of 2007, FDA inspectors – who are able
to check out less than 1 percent of regulated imports – refused
298 food shipments from China. By contrast, 56 shipments from
Canada were rejected, even though Canada exports about $10
billion in FDA-regulated food and agricultural products to the
United States – compared to about $2 billion from China.”
For its part, China claims hypocrisy because of the lengths the
U.S. is willing to go to protect its own domestic industries.
But it’s important to remember that it’s not just Washington
which has its disagreements with Beijing on the trade front. The
hue and cry is just as loud in Europe, where European companies
are often victims to a greater degree than their U.S. counterparts.
So look for increased retaliation on the part of the European
Union. None of this is good for the global economy and the
markets.
It’s also more than just trade at issue these days. It’s about
geopolitics, as I detail in the “foreign affairs” section below. For
now, suffice it to say China has been zero help to the United
States on two paramount issues, North Korea and Iran.
So about now, though, you may be thinking to yourself, ‘Hey
editor, why do you then own shares in the biodiesel company in
China that you visited last month?’ It’s an investment idea I
came across, it’s involved in alternative/clean energy, which
China desperately needs, and over time I just believe I can make
some money in it. But to those who are playing along with me, I
reiterate, this is an 18-24 month hold. The stock has been
struggling the past two weeks, I think simply for reasons of
skittishness over anything China (for non-Chinese investors, that
is). I have not sold any, and, understand it is the kind of stock
that can advance 25% in a single day.
But I do have to add that in the rest of my portfolio, the past few
weeks I have been a seller and am comfortably back to the 80%
cash level I’ve touted in this space. I sold my two traditional oil
& gas plays for substantial gains [I’ve only had one loser in this
sector in well over 20 trades the past eight years], I sold other
assorted stocks for profits, and even jettisoned my carbon fiber
holding in a classic ‘sell the news’ move. [Those following this
last one know what I’m referring to. I could also easily get back
into it later on, and I’ll tell you if I do.]
Basically, I now have the biodiesel position, a water story, and
two solar power plays (as well as some assorted flotsam). I
would just add on the solar issues, I told you last week to be
wary of all the fly by night operators arriving on the scene and
wouldn’t you know the Journal highlighted just this topic on
Wednesday, referring specifically to those outfits based in China.
I own the biggest play there (traded on the NYSE) and I also
have shares in a California-based solar power company that is
doing well. I view both of these as potentially multi-year holds,
though I expect the smaller operator to be acquired, possibly by
the big one.
So why the rush to raise cash? I don’t care what the experts say,
stocks are not cheap. Maybe not particularly expensive,
especially compared to valuation levels in 1999-2000, but not
cheap either. When you can earn 4.50%+ in cash, it’s not a bad
alternative.
I’m also concerned about terrorism this summer, far more so than
past years. One conventional attack on a major European city or
here would be relatively inconsequential, as we’ve learned from
the likes of London and Madrid. But two occurring in a short
period of time would hurt markets worldwide.
And of course it’s not as if the U.S. economy is suddenly off to
the races following four below trend quarters. Unbelievably,
some know-nothings took Thursday’s data on new-home sales,
up 16%, to mean we had hit a bottom in the real estate sector;
conveniently forgetting the fact the median home price was down
11%, year-over-year, and that new-home sales data is notoriously
inaccurate because it doesn’t account for contracts that are later
canceled. Sure enough, the next day we saw that the far more
important existing home sales index was off 2.6% and that the
median home price was down 0.8%. Additionally, inventories
rose to 8.4 months supply. You can not have a true recovery
until you begin to put a dent in this last one.
I also have to repeat an important theme for many of us, that
being property taxes. How lousy is it that the value of your
home is stagnating, at best, yet your taxes continue to rise like
clockwork; 5, 6, or 7 percent?! Do you think that leads to
increased consumer spending? I don’t. [What I do know is that
you’ll see more and more instances of citizens descending on
their respective city halls with pitchforks.]
And not for nothing, but interest rates are rising. Yes, we are
still at historical lows, but you continue to have the affordability
issue in most areas of the country, despite declines in prices,
while any increase in mortgage rates makes them even less so.
Plus you can’t ignore, from a macro standpoint, the fact up to $1
trillion in mortgages is set to reset by the end of the year…at
higher rates. In many cases, far higher.
Then there’s the price of gasoline. I get a kick out of all the talk
about how we are finally at levels set in 1981, when adjusted for
inflation. I’m going to get into the haves vs. have nots again next
week, but for now, $40 or $50 to fill your tank is big money for
many Americans. While we haven’t begun to cut back on
driving overall, there will be an impact in other parts of the
economy and I’m not even going to bring up hurricane season.
Lastly, in two different surveys released this week [AP-Ipsos and
New York Times/CBS News], only 25% of Americans say
things are headed in the right direction in this country. I don’t
need to rattle off the reasons why….you already know them. But
this abysmal reading is amidst an environment where we have
full employment, by most measures. That’s what makes it even
more disquieting to yours truly.
Street Bytes
–The seven-week winning streak for the Dow Jones and S&P
500 is over, with both off about 0.5% on the week. Nasdaq
declined for a third straight time, but the cumulative losses over
this stretch are miniscule. What was interesting, though, was the
S&P failed to close above its all-time high of 1527; surpassing it
a few times, intraday, before finishing at 1515.
–U.S. Treasury Yields
6-mo. 4.96% 2-yr. 4.85% 10-yr. 4.86% 30-yr. 5.00%
The 10-year finally broke through the trading range of 4.50%-
4.80%, though we need another week or so to confirm a trend.
Readings on manufacturing this week were actually pretty
decent and traders in the bond pits are back in the mode that the
Federal Reserve won’t be lowering rates anytime soon.
–It’s all about the environment these days as political leaders
around the world attempt to get ahead of the curve. The Wall
Street Journal reported that a bill introduced in the Senate would
force utilities to generate at least 15% of their power from
sources such as wind and solar, vs. the current 2%. And in
Japan, Prime Minister Shinzo Abe proposed that his nation halve
its greenhouse gas emissions by 2050 as part of a long-term
initiative to mitigate climate change following the expiration of
the Kyoto Protocol in 2013. Abe will present his plans to the
Group of Eight summit next month. [The U.S., however, is
headed for a collision with Germany and Chancellor Merkel over
Berlin’s plans on this front.]
–But wait….there’s more! General Electric said it has doubled
its sales of environmentally friendly products to a whopping $12
billion over the past two years. GE CEO Jeffrey Immelt,
appearing in California with Green Gov. Schwarzenegger,
announced his company has $50 billion of projects in the
pipeline. GE has been focusing on wind turbines, water-
purification systems, and energy-efficient appliances.
And in China, wind energy is taking off, just like the above
mentioned solar sector. There are now 58 manufacturers of wind
turbines in China, owing to the fact 70% of the content on
renewable energy projects must have local content. Of course
this is leading to irrational behavior and yet another herd-like
rush…over a cliff, inevitably.
The head of China’s EPA, though, said “Growing population and
rapid economic development have posed grave threats…We
must forbid those projects that cause pollution or damage to the
environment and regard biodiversity conservation as an integral
part of the environmental assessment of other projects,”
proclaimed director Wu Xiaoqing. [South China Morning Post]
–Australia finally received rain in the southeastern part of the
country last weekend, but it is merely a drop in the bucket.
Nonetheless, as Prime Minister John Howard noted, it provided a
much needed morale boost.
–In one of the many private equity deals on the week, wireless
phone company Alltel agreed to be sold to a consortium
including the private equity arm of Goldman Sachs for $27.5
billion. But the premium was only 10%, leaving many
shareholders complaining Alltel sold out simply to line the
pockets of top executives who could cash in.
–A report in the New England Journal of Medicine linked the
widely used diabetes drug Avandia to an increased risk of heart
attack, following an extensive study by noted cardiologist
Steven Nissen of the Cleveland Clinic. Shares in maker
GlaxoSmithKline fell sharply, as you’d expect, while the Food
and Drug Administration is under fire for not having acted
sooner given the fact it had knowledge of the risks years earlier.
–There’s already talk that Wall Street’s bonuses will rise another
10% to 15% this year. In 2006, the average bonus was $137,600;
17% ahead of 2005’s record levels. Consultant Alan Johnson
told Crain’s New York Business, “Awards are being made
without apology.”
–From analyst Kevin Kerr: “Feedlot operators and farmers are
feeding livestock anything they can…besides corn. (Cows) are
eating leftover trail mix from factory floors, old chicken guts
from the local poultry processing plant, leftover chocolate
scrapings from Hershey’s and burned cookies from Keebler…
anything but corn and the legendary DGSS (an ethanol byproduct
that can be fed to livestock). Farmers have been telling me that
DGSS lacks the sugar and nutrients needed to fatten up hogs and
cattle…not to mention…animals don’t seem to like the taste….
“Garbage in, garbage out, as they say. If your steak at Ruth
Chris tastes like burnt cookies, you’ll know why.” [Source:
Agora Financial]
–Unbelievably, the Canadian dollar is approaching parity. It
seems like only yesterday (2002, to be exact) that the dollar hit
an all-time low of 62 cents and an American buying a home there
was getting a steal. No longer, as Canada’s economic
performance has been solid. [Though it’s deeply divided
between the resource rich West and the depressed industrial
heartland of Ontario and Quebec. Unemployment is 3.4% in
Alberta, for example, but 7.2% in Quebec.]
–Odyssey Marine Exploration Inc. announced it had recovered
17 tons of gold and silver coins from a colonial-era shipwreck,
worth a reported $500 million, but they have provided few
details. One veteran treasure hunter told the L.A. Times, “There
is no such thing as $500 million on any wreck in the world.”
But this story hits Street Bytes because Odyssey Marine
Exploration is a publicly traded company and the day the
announcement was made, May 18, the shares rose almost 100%
(from $4.60 to $8.94, including after-hours trading), before
closing this week at $6.85. [John Edwards owns an interest
through his consulting work with Fortress Investment Group, the
hedge fund, which holds about 10% of the company.]
–Ron Baron, the founder of the investment company bearing his
name, paid $103 million for a 40-acre estate in East Hampton,
New York, a record for residential property in the U.S. The
owner is the heiress to the Schlumberger oil service giant.
And in yet another example of our current Great Gatsby II era,
the top summer rentals (Memorial Day thru Labor Day) in the
Hamptons are fetching as much as $450,000 for the season. If
you’re not familiar with this part of the country, also understand
it often takes up to five hours to drive there from New York City.
–Former GE CEO Jack Welch gave a talk to a group of Moscow
businesspeople the other day, telling them that the key to running
a successful company was transparency, leadership and vision….
as well as beer. Welch said celebrating victories with staff and
showing appreciation was critical. “In my early days, I’d bring a
keg of beer in every Friday night.” [The Moscow Times]
Foreign Affairs…Iraq
President Bush took advantage of a splintered Democratic party
and achieved victory on the war funding front as both houses of
Congress approved by substantial margins the spending of $100
billion on Iraq and Afghanistan through September, and with no
timetables for troop withdrawals as called for by Senate Majority
Leader Harry Reid and House Speaker Nancy Pelosi. I’ve been
noting for months that rational voices such as that of Michigan
Democratic Senator Carl Levin were ignored and now the
Democrats have a battle on their hands with the anti-war wing of
the party. If it wasn’t so serious, the sheer incompetence
displayed by Reid and Pelosi would be laughable. [We’ll also
see how things shake out for Barack Obama and Hillary Clinton;
both of whom were among just 14 senators opposing the
measure.]
Former Democratic Senator Bob Kerrey noted in an op-ed for the
Journal:
“Suppose we had not invaded Iraq and Hussein had been
overthrown by Shiite and Kurdish insurgents. Suppose al Qaeda
then undermined their new democracy and inflamed sectarian
tensions to the same level of violence we are seeing today.
Wouldn’t you expect the same people who are urging a unilateral
and immediate withdrawal to be urging military intervention to
end this carnage? I would.
“American liberals need to face these truths: The demand for
self-government was and remains strong in Iraq despite all our
mistakes and the violent efforts of al Qaeda, Sunni insurgents
and Shiite militias to disrupt it. Al Qaeda in particular has
targeted for abduction and murder those who are essential to a
functioning democracy: school teachers, aid workers, private
contractors working to rebuild Iraq’s infrastructure, police
officers and anyone who cooperates with the Iraqi government.
Much of Iraq’s middle class has fled the country in fear.
“With these facts on the scales, what does your conscience tell
you to do? If the answer is nothing, that it is not our
responsibility or that this is all about oil, then no wonder today
we Democrats are not trusted with the reins of power….
“The key question for Congress is whether or not Iraq has
become the primary battleground against the same radical
Islamists who declared war on the U.S. in the 1990s and who
have carried out a series of terrorist operations including 9/11.
The answer is emphatically, ‘yes.’”
But there should be no popping of champagne in the White
House, either. President Bush was able to buy more time, as he
hoped, but the American people remain a surly bunch, witness
Bush’s 30% job approval rating in the New York Times/CBS
News survey and the fact 3 in 4 believe the war is going badly.
Bush is now forced to embrace the very Iraq Study Group report
his aides initially belittled.
And now Moqtada al-Sadr has returned. The radical Shiite
cleric, after four months in Iran, blasted the U.S. (and for good
measure, Israel) in a sermon on Friday, saying in part:
“No, no for the devil. No, no for America. No, no for the
occupation. No, no for Israel.” [AP]
But then he also called on his followers to demonstrate
peacefully. Beyond that, I’m not going to attempt to divine his
motives as I’ve seen twenty different explanations thus far.
Suffice it to say, his militia splintered in his absence, he hopes to
reunite it, and the U.S. continues to bemoan the fact they didn’t
take him out years ago.
There was also a dire warning from Turkey’s Prime Minister
Erdogan this week concerning a topic I’ve long discussed, the
Kurds. It would appear Kurdish terrorists were responsible for a
deadly blast in Ankara, though the Kurds deny this as of this
writing, even as Erdogan is acting as if it had to be them, adding
“the United States must fulfill its responsibility” in cracking
down on the Kurdish terrorist organization, the PKK, that has
found safe haven in Iraq. The U.S. has refused to do so thus far,
fearing it would further fracture efforts to stabilize the country.
But, significantly, Erdogan now says he would back the generals
if they decided to retaliate and move into Kurdistan. The White
House has its head in the sand on this one.
Iran: In issuing its formal report to the UN Security Council,
reaffirming that Tehran’s uranium enrichment program continues
apace as the mullahs ignore previous Security Council
resolutions, the most worrisome aspect is that the International
Atomic Energy Agency admits its inspectors are losing track of
key aspects of the operation.
So how close is Iran to having the bomb? We don’t have a
freakin’ clue, mainly because we have no idea what is taking
place outside the one facility the IAEA has had some access to.
Meanwhile, President Bush pleads for increased sanctions
against Iran, but there is practically zero chance Russia and
China will go along with them, with each having veto power.
Jim Hoagland wrote the following for his Washington Post
column.
“The United States has rattled the saber loudly enough. The
dispatching of a second aircraft carrier group toward Iran’s
waters, the capture and holding of five Iranian operatives in
northern Iraq, and a hard-line speech by Vice President Cheney
in the Gulf have gotten (Iranian President) Ahmadinejad’s
attention. Targeted banking sanctions are creating significant
dislocation and pain for Tehran.
“This is the moment for Bush to show America’s long-term
strength by putting his weight behind the second track of a
bifurcated policy: fully engaging with Iran on both Iraq and
nuclear weapons, and bringing the Gulf Arabs and European
allies into that dialogue. That would be the work of a confident
giant.”
But the time for this was last year when I was arguing we should
have end run Ahmadinejad. We didn’t. The nuclear program is
now on an irreversible path to fulfillment, thereby virtually
guaranteeing military conflict.
Israel: Hamas declared open war on Israel, pledging to renew
suicide bombings, and Israel in turn vowed to take out senior
Hamas officials, as is their right, including Palestinian Prime
Minister Haniya and exiled leader Khaled Meshaal, who resides
in Damascus. [Friday, however, Israel apologized for an
airstrike near Haniya’s home.]
Lebanon: Palestinian terrorists, no longer content with making
life miserable for Israelis, went to war with the Lebanese Army
in a refugee camp (these are really cities) outside Tripoli. The
150 to 200 militants, aligned with al Qaeda in Iraq, have the
backing of Syria as Syrian President Bashar Assad pulls another
deadly stunt in his attempt to prevent a UN tribunal on Syria’s
role in the assassination of former Lebanese prime minister Rafik
Hariri. It is critical the Lebanese Army crush Fatah al-Islam and
at least the White House has responded to the government’s call
for more arms and munitions.
It is also imperative the UN tribunal be convened, but, here again
Russia and China represent the stumbling blocks.
So on three incredibly vital issues, North Korea, Iran and
Lebanon, Russia and China fail to do the right thing.
North Korea: Let’s see…Pyongyang was to have shut down its
nuclear weapons facility at Yongbyon about six weeks ago and
instead on Friday it fired a bunch of short-range missiles into the
Sea of Japan and in a defense ‘white paper’ accused the U.S.,
Japan and South Korea of being Asia’s biggest security threats,
adding North Korea will only dismantle its nuclear program if
these three dismantle missiles aimed at it.
The document also says the U.S. is “the greatest source of threat
to peace and security” because of its nuclear security umbrella,
while “Japanese militarism has already gone beyond the
dangerous line.”
China: There was a story in Friday’s Financial Times that “The
U.S. is increasingly concerned about China’s deployment of
mobile land and sea-based ballistic nuclear missiles that have the
range to hit the U.S., according to people familiar with an
imminent Pentagon report on China’s military.”
This is not anything new, having reported on it long ago, but it
presents a good background for a story in the May 21 edition of
Defense News by Wendell Minnick concerning a report authored
by Larry Wortzel, commissioner of the U.S.-China Economic
and Security Review Commission. Released by the U.S. Army
War College, “China’s goal of developing the capability of
attacking an aircraft carrier group with ballistic missiles appears
near,” as Minnick writes.
Larry Wortzel:
“For some time, American naval officers have dismissed this
capability as beyond the grasp of the PLA [People’s Liberation
Army], but advances [in technology] make the Western Pacific a
more dangerous place, especially as China improves its own
sensor systems.”
Thomas Kane, author of numerous publications on China’s
nuclear capabilities, said that “PRC [People’s Republic of China]
officers feel they can present their weapons as ‘sa shou jian’ [a
trump card], (which) further implies that they are prepared to
entertain the possibility of using nuclear weapons….An
American naval task force, for instance, would be well equipped
to resist non-nuclear missile bombardment. For missiles to serve
as a trump card, either the targets must be exceptionally
significant or the warheads must be exceptionally devastating.”
Wendell Minnick:
“China has openly discussed using nuclear weapons on aircraft
carrier groups and concentrations of U.S. military forces on
Okinawa, particularly since these types of targets are isolated
from civilian populations and serve as a potent threat to China.”
James Mann, strategist and author at Johns Hopkins University’s
Paul H. Nitze School of Advanced International Studies, had the
following related thoughts in an op-ed for the Washington Post.
“For authoritarian leaders around the world seeking to maintain
their grip on power, China increasingly serves as a blueprint.
We’re used to thinking of China as an economic miracle, but it’s
also becoming a political model. Beijing has shown dictators
that they don’t have to choose between power and profit; they
can have both. Today’s China demonstrates that a regime can
suppress organized opposition and need not establish its
legitimacy through elections. It shows that a ruling party can
maintain considerable control over information and the Internet
without slowing economic growth….
“This all adds up to a startling new challenge to the future of
liberal democracy. And the result is ominous for the cause of
freedom around the world. China’s single-party state offers
continuing hope not only to such largely isolated dictatorships as
Burma, Zimbabwe, Syria and North Korea but also to some key
U.S. friends who themselves resist calls for democracy (say,
Egypt or Pakistan) and to our neighbors in Cuba and
Venezuela….
“If we don’t take China’s new model as seriously as the rest of
the world does, we could find that we’re the ones on the wrong
side of history.”
Lastly, the one thing Beijing fears more than anything else these
days is a restive public and this week we learned of riots in
Guangxi province over China’s one-child policy. [Two in rural
areas if the first child is a girl.] Just recently, when I was in
China, I wrote of my talk with my interpreter and her own family
experience wherein she said if the parents can afford it, they can
circumvent the system. It boils down to yet another case of the
haves and the have nots.
Pakistan: It is not an overstatement to say we have an incredibly
dangerous situation developing quickly here as President
Musharraf is clearly losing control. Musharraf himself
acknowledged Islamic militancy is spreading across his country
and “we need to strongly counter it,” though he didn’t elaborate.
Musharraf lost a key ally in his ruling coalition this week and the
president is under increasing pressure to step down, following his
own incompetence in suspending the Chief Justice of the
Supreme Court last March. All the while, the United States
continues to give Pakistan about $1 billion in aid a year for
conducting counterterrorism efforts along the border with
Afghanistan, even as there has been limited success as al Qaeda
and the Taliban operate virtually unimpeded. Since 9/11,
Pakistan has received close to $10 billion of our taxpayer
dollars, including $6 billion for the counterterrorism program.
Much of the aid money is actually funding weapons systems
geared for countering India and not fighting the terrorists.
But the real struggle internally these days is more between the
two large secular parties, headed by former prime ministers
Benazir Bhutto and Nawaz Sharif, and the Islamic
fundamentalists. Now, however, Musharraf is acting like he will
stage his own reelection without allowing the other parties to
participate; this after earlier pretending he was prepared to allow
Bhutto to return from exile. [Sharif is in the same boat.]
The Washington Post editorialized:
“The (Bush) administration has been endlessly forgiving of the
strongman even as he has failed again and again to meet his
commitments. If Mr. Musharraf is now allowed to isolate
himself behind riot police and militia forces while shunning
secular democrats, he will set the stage for just the sort of
nightmare scenario in Pakistan that has motivated U.S. support
for him since 2001.”
Afghanistan: Meanwhile, there have been clashes between
Pakistani and Afghan forces along their 1,600-mile long border
over the past two weeks. Nothing major, as yet, but understand
the battles, that have claimed at least 13 Afghan soldiers and an
unknown number of Pakistanis, do not involve the Taliban.
While Pakistan has a superior force, the growing tensions have
united Afghans across all ethnic lines. You’ve seen how poor
relations are between Musharraf and Afghan President Hamid
Karzai and the clashes are a manifestation of this. And who
benefits? The Taliban, of course, who are receiving aid from
Pakistan’s intelligence service, the ISI.
Russia / UK: Relations between these two are at a post-Cold War
low as British prosecutors charged Andrei Lugovoi with the
murder of former Soviet agent Alexander Litvinenko, who was
poisoned last fall. The Kremlin refuses to extradite Lugovoi,
himself a former KGB agent. A Downing Street spokesman
said:
“We obviously have political and economic connections with
Russia and Russia is clearly playing an important role in
international affairs. However, that does not in any way obviate
the need for international law to be respected and we will not in
any way shy away from trying to ensure that in a case such as
this.”
British Foreign Secretary Margaret Beckett said “This was a very
serious crime.” Widow Marina Litvinenko has been consistent
throughout. “It is important for British people to see that those
who carried out this attack on British soil are brought to justice
and to see that they are protected from what people see as state
terrorism.”
Ukraine: Very dangerous situation developing here as the
president and prime minister battle over who has control of the
interior ministry troops, some 40,000. President Yushchenko
sacked a prosecutor and interior forces occupied the prosecutor’s
offices. But the interior minister is an ally of Prime Minister
Yanukovych. Yanukovych and his supporters have accused
Yushchenko of driving the country to civil war.
Remember, any conflict here could result in a serious
confrontation between the West and Russia.
Kazakhstan: Last week I blasted this place for acceding to
Russia’s demands on a new pipeline that hurts the United States
and Europe, despite the huge investments Western energy
companies have made here, and then on Tuesday, President
Nazarbayev approved constitutional amendments allowing him
to stay in office for life, a move condemned by the opposition as
an attempt to establish a personality cult.
Ireland: Prime Minister (Taoiseach) Bertie Ahern appears to
have captured enough votes to stay in power a third term in
elections held this week, though his coalition may have a
different makeup. Despite Ireland’s roaring economic success,
many are displeased about the lack of progress on issues such as
education and infrastructure, as well as affordability on the
housing front.
Let me tell you what is a huge problem here, after my 15+ visits
to Ireland since 1989…the environment. Bottom line, Ireland is
a ticking time bomb. One basic issue is the lack of landfills, and
then you have the excessive discharge of waste into the sea, a big
problem in my little town of Lahinch on the west coast.
So I’m reading Bloomberg News’ coverage of the election and
notice this item.
“In Galway, in the west of Ireland, contamination of the city’s
water has been linked to more than 200 cases of gastrointestinal
illnesses over the past month. Ahern’s rivals say the outbreak is
an example of the government’s failure to improve Irish
infrastructure.”
That is oh so true. I’m telling you, unless they get their act
together, tourism could plummet, for starters. There are other
places to go, after all. The Irish miracle is built on an
increasingly shaky foundation.
Kenya: Not that you’d choose to go here instead. A cult, the
Mungiki sect, is back in the news for a number of beheadings
(six at last count). From BBC News: “Police say the latest
victims of the sect members were abducted and tortured before
being hacked to death and their bodies dismembered….The
group has been linked to influential politicians from central
Kenya in the past and there are fears they may be used to disrupt
the general elections later this year.” Mungiki claims to have
more than one million followers. Lovely.
Zimbabwe: But not to be outdone, President Robert Mugabe’s
grip on power is all the more tenuous because he can no longer
pay, or feed, the Army. The defense budget has been wracked by
hyperinflation as a private’s monthly pay, about $100 in
February, is now closer to $8 with inflation running at 3,700
percent. One Western diplomat told the London Times, “The
time between each big pay increase is getting shorter and shorter.
The day is coming, like it did in any number of South American
dictatorships, when the new pay rise will be worthless as soon as
it is awarded.”
Random Musings
–A study by the Pew Research Center had some disturbing
findings, to say the least. 1 in 4 young American Muslims,
between the ages of 18 and 29, condone suicide bombings, at
least in some circumstances. Only 40% of U.S. Muslims,
overall, believe that Arabs carried out the 9/11 attacks. There
were a number of other similar results and about the only
halfway optimistic one was that only 5% of U.S. Muslims
expressed favorable views of al Qaeda.
–I’m not going to waste a lot of space on the immigration
legislation for the simple reason that it is going to undergo a
number of significant changes over the coming weeks. That
said, according to a New York Times/CBS News poll, two-thirds
believe illegals with a good employment history and no criminal
record should gain legal status as the bill proposes. [Paying a
$5,000 fine and receiving a renewable multi-year visa.] Many
Republicans call this amnesty…rewarding those who break the
law. Another survey by the Pew Center says the public supports
this path to citizenship by a 59-37 margin.
I do agree with the Times’ Thomas Friedman when it comes to
accepting the best and the brightest from overseas. We can’t
have enough of them. They already dominate our graduate
schools…let’s make sure they stay when their studies are over.
–It’s increasingly apparent that the 2008 presidential election
cycle is going to be chaotic and not in the best interests of our
democracy. We should have one national primary, but fat
chance that will ever happen.
Instead, we have a situation where all the big states are
scrambling to accelerate the schedule, with Florida now holding
theirs on Jan. 29, or before California, Illinois and some other
biggies go on Feb. 5. There is even talk of circumventing New
Hampshire and holding a primary in 2007…which is totally
insane. What it does mean is that both parties will undoubtedly
have selected their nominees in February, and that one, or both,
will be dissatisfied with the outcome by April…after which the
country will turn to a legitimate third party candidacy.
Like that of New York Mayor Michael Bloomberg, who enjoys a
stupendous 74% approval rating in the Big Apple, though New
Yorkers don’t want him running for president. They prefer he
target the governor’s office.
–Mitt Romney continues to surprise, as a Des Moines Register
poll shows him at 30% in Iowa, vs. 18% for John McCain and
17% for Rudy Giuliani.
–70% of the 11 states in the West are either in drought or
abnormally dry. The snowpack in the Sierra’s was just 29% of
normal this year.
–The 60-year-old New Jersey mother who set a record for
having twins after taking fertility drugs is incredibly selfish.
–And then there was this one from my home state. A Teaneck
High School girl died in a swimming pool in Ghana and the
parents want to know if it was murder. Folks, this was a “class
trip” to Africa. What the heck was everyone thinking?
Whatever happened to a little bus ride down to our nation’s
capital for some culture…or Philadelphia…or freakin’ Disney
World, if this was some kind of reward. What a bunch of idiots.
–But how about our governor, Jon Corzine? Very funny story in
the New York Times by David Kocieniewski and Serge F.
Kovaleski.
It seems Mr. Corzine settled with his former girlfriend, labor
leader Carla Katz, for $6 million when they split up. Now your
first question should be; they weren’t even engaged, what’s the
deal? As Republican state leaders are now inquiring, was this
hush money of some kind? Regardless, the relationship between
the two is “strained.”
“Some see (Katz) as a spurned lover still nursing hopes of
reconciliation; others say she is a savvy advocate eager to
leverage any avenue for political results. He is alternately
viewed as afraid of what she might say about him, or simply as a
rich and generous man who considered the relationship
significant enough to warrant helping her maintain the lifestyle
they had shared.”
But shortly after their breakup in 2004, Katz rented an apartment
two floors directly below Corzine’s in Hoboken, where he was
living following his divorce here in Summit (world headquarters
of StocksandNews). “She has frequently shown up at his public
appearances…and it is not unusual for her to call his office more
than once a day to offer detailed advice.”
But following Corzine’s auto accident, “As he lay in intensive
care…according to hospital officials, the security guards
received an unusual and explicit order from the governor’s aides:
under no circumstances was Ms. Katz to be allowed to visit.”
And this: “Since Mr. Corzine was sworn in as governor in
January 2006, Ms. Katz has made herself a regular presence. At
his inaugural ball, her black silk and lace Versace gown attracted
the attention of guests and gossip columns. When he made his
first address to the Legislature, Ms. Katz was waiting at the door
and kissed him on the cheek as he entered.”
Needless to say, Corzine’s latest companion, Sharon Elghanayan,
isn’t pleased. But, again, what was the deal with the $6 million?
Sharon is going to get more in short order, mused your editor.
–There’s a lesson in the following, somewhere. Two South
Korean students were electrocuted in the heart of Shanghai’s
commercial district after falling into a faulty fountain. “The
Shanghai Daily and other newspapers said the accident was
apparently caused by electricity escaping from the fountain’s
electrical rig…The pair had been relaxing by the fountain after a
meal when the woman, 21, either fell in or placed her hand in the
water. The force of the electric charge caused her to fall in and
her male companion, 19, was electrocuted trying to rescue her.”
Just another reason to stay away from the water…everywhere.
Elsewhere in China, seven students were killed and 39 injured by
a lightning strike on their school in a mountain area. In the same
city of Chongqinq, in April four construction workers were killed
by lightning when their mess tent was struck. Yet another
destination to lop off my list.
–The other morning, NBC’s “Today” program had a highly
disturbing story on a trend among teenage boys to fight each
other and then post the videos. They wear boxing gloves and
football helmets, but they are inflicting vicious blows to each
other’s head and of course sometimes the helmet slips off and
any semblance of protection is rendered useless.
Incredibly, though, NBC didn’t tie this idiotic ‘game’ to the
raging success of “Ultimate Fighting” across America, a topic
Sports Illustrated highlights in their current issue.
Now I’ll admit to being a fan of boxing, when growing up,
particularly of the heavyweight division when it was at its best,
but I have trouble watching the sport these days. But if you feel
boxing should be illegal because of the health risk, you can’t
possibly condone Ultimate Fighting. Yet this new ‘sport’ is
garnering huge ratings on television and for pay-for-view bouts.
I’m sorry if you’re a fan…I just find this sick.
–I came within one number of being selected for state grand jury
service this Thursday as I ventured down to Trenton after being
served a summons the other week. This was punishment for
getting off regular jury duty last year when I had a previously
scheduled trip to Europe. The head of jury selection in my
county at the time said, OK, you get off, but I’m throwing your
name in the state pool.
Now understand, if you haven’t been called for a state grand
jury, that you have to show up or you’re arrested. Incredibly, 10
of 70 blew it off, five of whom ended up being on the list of 23
to serve. As the five were named, the presiding judge just
muttered, “issue bench warrant…issue bench warrant…issue
bench warrant…”
It turns out I was next in line after #23 was filled (thanks to the
five idiots), but at least I went through the process. This
particular jury, we were told, was being empanelled for up to 20
weeks and it would have been a drag, considering what an awful
drive it is from my place to Trenton, but part of me wanted to
indict a ham sandwich, as the saying goes.
–Lastly, my cholesterol is down! Actually, it’s been declining
since I started the StocksandNews diet a number of years ago.
Large black coffee and one chocolate frosted doughnut (chilled
for two hours in the office refrigerator) for breakfast; Quaker
Instant Oatmeal for lunch 3 or 4 times a week (I was serious
about this the other day); Chex Mix, whole grain pretzel rods, a
handful of almonds, beer (remember to mix in some premium
from time to time), and once a week…salmon, preferably of the
wild variety.
There you have it…no guarantees, of course.
—
Pray for the men and women of our armed forces. I don’t like to
single out individuals, but I can’t help but note the killing of Pfc.
Joseph Anzack, having watched a touching interview with his
father on “Today.” As the New York Post editorialized on
Friday:
“Those who would use America’s fighting forces as a cynical
political pawn would do well to consider the words of Joe
Anzack’s father. ”I was honored to have him serve this country.
I know he went over there and made a difference.””
God bless America.
—
Gold closed at $655
Oil, $65.20
Returns for the week 5/21-5/25
Dow Jones -0.4% [13507]
S&P 500 -0.4% [1515]
S&P MidCap -0.2%
Russell 2000 +0.8%
Nasdaq -0.1% [2557]
Returns for the period 1/1/07-5/25/07
Dow Jones +8.4%
S&P 500 +6.9%
S&P MidCap +11.4%
Russell 2000 +5.4%
Nasdaq +5.9%
Bulls 54.3
Bears 20.7 [Source: Chartcraft / Investors Intelligence]
Have a great week. On Memorial Day…
“Think not only of their passing….remember the glory of their
spirit.”
Brian Trumbore
